Future satellite casino management fees should be adjusted according to gaming revenue – David Chow

The chairman and non-executive director of gaming company Macau Legend, David Chow Kam Fai, that future management fee to be charged to companies responsible for satellite casinos should not be fixed but adjusted according to the gambling revenue ratio of the property.

In comments to the Chinese-language newspaper Macao Daily, Chow noted that many satellite casino managers have expressed that the management fees should be adjusted according to the gambling revenue, otherwise the Hong Kong Stock Exchange authorities may not approve as “technical problems” may exist.

Macau Legend oversees a number of so-called satellite casinos in Macau – including the Legend Palace casino hotel at Macau Fisherman’s Wharf – under the Macau gaming licence of SJM Holdings Ltd.

A new version of the general gaming law presented by the Macau SAR government allows for satellite casinos to continue operating even if the property where they are located is not completely owned by a gaming concessionaire, a turnaround from the previous stance that could see these casinos closed if the situation was not resolved in a three-year transitional period after the new law was is enforced.

The previous draft wording had led several industry insiders to warn that multiple satellite casinos in the city could be closed and increase the local unemployment levels.

Still, under the new regulations, these managing entities will only be able to charge managing expenses and will not be allowed to share a percentage or commission of gaming revenues.

The businessman added that management contracts all over the world are based on concrete rules and considered that the gaming revenue should be used as a criterion for the management fees, otherwise, it will be difficult for the gaming concessionaires to explain to minority shareholders.

“It is inevitable that there will be highs and lows in business operations and profitability, and all business owners hope to have long-term development, therefore the pricing of management fees should not remain unchanged,” he noted.

Chow also expressed worries that Macau banks will collect the loans if satellite casinos close causing a “domino effect” on the local economy, since Macau banks have provided a total MOP200 billion in loans to gaming concessionaires, and some MOP20 billion in loans were provided to satellite casinos and other investors.

He also stressed that, unlike other foreign countries, Macau does not have regulations on company liquidation, and companies will stop the operation immediately without providing transitions for the employees and stockholders.

Chow also pointed out that, the government should support the development and operation of the gaming industry, since it is the dominant industry in Macau, and the gaming industry could drive the development of other industries and ensure employment.

The gaming law directly affects the development of the industry, and is a special law that should not overlap with the other Macau code of laws, he said.

The Macau Legend founder has also recently publically questioned the government’s strategy diversification strategy and the proposed changes to the current gaming sector regulatory framework.